NO. 3:21-cv-00711
UNITED STATES DISTRICT COURT MIDDLE DISTRICT OF TENNESSEE NASHVILLE DIVISION
June 6, 2022
WAVERLY D. CRENSHAW, JR., CHIEF UNITED STATES DISTRICT JUDGE
MEMORANDUM OPINION AND ORDER
Cabinets to Go, LLC (“CTG“) is suing Qingdao Haiyan Real Estate Group Co., LTD (“Haiyan“), Qingdao Drouot Wood Industry Co., LTD (“Drouot“), Alno Industry SDN BHD (“Alno“), and Scioto Valley Woodworking, Inc. (“Valleywood“) for violations of the Tennessee Consumer Protection Act (“TCPA“), among other causes of
I. BACKGROUND
CTG sells cabinets and related accessories in the United States. (Doc. No. 26 ¶ 21). Its principal place of business is Tennessee, but CTG obtains materials for its cabinets from suppliers around the world. (Id. ¶¶ 2, 16, 22). Depending on the origin of the material CTG imports, it may have to pay tariffs, antidumping duties (“ADs“), and/or countervailing duties (“CVDs“) of varying sizes. (Id. ¶ 16). Accordingly, CTG requires that its suppliers verify the country of origin of the material they sell to CTG. (Id. ¶ 19).
Haiyan is one of CTG‘s suppliers. (Id. ¶ 23). It is a Chinese company. (Id. ¶ 3). It owns and operates Drouot, which is also in China; Alno, which is in Malaysia; and Valleywood, which is in Ohio. (Id. ¶¶ 4, 6, 8).
CTG originally started doing business with Haiyan in 2011. (Doc. No. 62-1 ¶ 9). At that time, CTG accepted products manufactured in China. (Id.). However, CTG changed its business plan in 2019 and stopped accepting such products. (Id. ¶ 10). As a result, CTG stopped ordering materials from Haiyan. (Id. ¶ 13).
In response, in late 2019, representatives of Haiyan travelled to Tennessee. (Id. ¶ 15). They met with CTG and attempted to persuade it to resume its business relationship with Haiyan. (Id.). The representatives informed CTG they were willing to find a manufacturing mill outside China to fulfill CTG‘s requirements. (Id. ¶ 16). CTG was open to restarting its relationship with Haiyan on that condition. (Id.).
Later, in January 2020, a Haiyan representative made another trip to Tennessee to meet with CTG executives. (Id. ¶ 19). Haiyan informed CTG it had obtained a mill in Malaysia (Alno) that it could use to manufacture products for CTG. (Id.).
Shortly thereafter, Haiyan representatives traveled to Tennessee for a third time. (Id. ¶ 20). They attended a CTG trade show, where they hosted a booth. (Id.). They also solicited sales from CTG and, as a result, CTG began purchasing five new lines of products from Haiyan, based on the parties’ agreement that the products would be manufactured in Malaysia. (Id. ¶¶ 21–22; Doc. No. 26 ¶ 25). Between February 2020 and July 2021, CTG purchased an average of $950,000 worth of products from Haiyan per month. (Doc. No. 62-1 ¶ 24).
Near the end of July 2021, CTG began to suspect Haiyan was shipping products to it that were manufactured in China, as opposed to Malaysia. (Doc. No. 26 ¶ 33). In August 2021, representatives of Haiyan admitted, during a phone call with CTG, that certain products in transit to CTG had been manufactured in China. (Doc. No. 62-1 ¶ 43). Over the next few weeks, thirteen containers of products manufactured in China arrived in the United States. (Id. ¶ 44). CTG tried to return the containers, but the shipping company would not take them back. (Id. ¶ 45).
Ultimately, U.S. Customs and Border Protection (“CBP“) informed CTG that it had to immediately import three of the thirteen containers or CBP would seize them. (Id. ¶ 46). CTG reluctantly imported all thirteen containers, paying $650,000
CTG sued in this Court on September 14, 2021 (Doc. No. 1) and filed an Amended Complaint on November 3, 2021 (Doc. No. 26). It invoked the Court‘s diversity jurisdiction. (Id. ¶ 12).
II. LEGAL STANDARD
To survive a motion to dismiss for failure to state a claim, a complaint must meet
There are separate principles the Court must consider in evaluating a motion to dismiss for lack of personal jurisdiction. The “party asserting personal jurisdiction bears the burden of establishing that such jurisdiction exists.” Kerns v. Caterpillar, Inc., 583 F. Supp. 2d 885, 891 (M.D. Tenn. 2008). However, the party “need only present a prima facie case for jurisdiction.”1 Kerry Steel, Inc. v. Paragon Indus., Inc., 106 F.3d 147, 149 (6th Cir. 1997). The party can meet this burden by establishing “with reasonable particularity sufficient ‘minimum contacts’ with [the forum state] so that the exercise of jurisdiction over [the defendant] would not offend ‘traditional notions of fair play and substantial justice.‘” Neogen Corp. v. Neo Gen Screening, Inc., 282 F.3d 883, 889 (6th Cir. 2002) (quoting Int‘l Shoe v. Washington, 326 U.S. 310, 316 (1945)). In determining whether a plaintiff established such contacts, courts may look to the “plaintiff‘s complaint and affidavits.” Kerry, 106 F.3d at 149. They must “not consider facts proffered by the defendant that conflict with those offered by the plaintiff.” Neogen, 282 F.3d at 887. However, they need not “ignore undisputed factual representations of the defendant which are consistent with the representations of the plaintiff.” Kerry, 106 F.3d at 153.
III. ANALYSIS
The Court has personal jurisdiction over Haiyan and CTG has stated a TCPA claim against it. However, the Court does not have personal jurisdiction over Valleywood, Drouot, or Alno. Accordingly, the Court will permit CTG‘s claims against Haiyan to proceed and will dismiss the claims against Valleywood, Drouot, and Alno.
1. The Court Has Personal Jurisdiction Over Haiyan.
The Court may exercise personal jurisdiction over Haiyan. “Personal jurisdiction may be found either generally or specifically.” Miller v. AXA Winterthur Ins. Co., 694 F.3d 675, 678 (6th Cir. 2012). “For specific jurisdiction to exist in a diversity case, two factors must be satisfied: the forum state long-arm statute, and constitutional due process.” Id. at 679. Tennessee‘s long-arm statute “has been interpreted as coterminous with the limits on personal jurisdiction imposed by the due process clause.” Bridgeport Music, Inc. v. Still N The Water Pub., 327 F.3d 472, 477 (6th Cir. 2003) (citation and quotation omitted). Accordingly, CTG need only show that personal jurisdiction over Haiyan comports with federal due process requirements. It has done so.
There is a “three-part test for determining whether, consistent with due process, a court may exercise specific personal jurisdiction.” Youn v. Track, Inc., 324 F.3d 409, 418 (6th Cir. 2003). First, “the defendant must purposefully avail himself of the privilege of acting in the forum state or causing a consequence in the forum state.” (Id.). Second, “the cause of action must arise from the defendant‘s activities there.” (Id.). Third, “the acts of the defendant or consequences caused by the defendant must have a substantial enough connection with the forum state to make the exercise of jurisdiction over the defendant reasonable.” (Id.). Courts sometimes refer to this final element as the “fairness” requirement. First Nat. Bank of Louisville v. J. W. Brewer Tire Co., 680 F.2d 1123, 1126 (6th Cir. 1982). Each of the requirements for the Court to exercise specific personal jurisdiction over Haiyan are present in this case.
To start, Haiyan purposefully availed itself of the privilege of conducting business activities in Tennessee. A defendant purposefully avails itself of a forum state where it “engag[es] in activity that should provide ‘fair warning’ that [it] may have to defend a lawsuit there.” Youn, 324 F.3d at 418. Haiyan‘s representatives traveled to Tennessee on three separate occasions to solicit business from CTG.2 (Doc. No. 26 ¶¶ 15–20). Indeed, Haiyan has done extensive business with CTG as a result of those solicitations. (Id. ¶¶ 21–25). As noted, Haiyan sold CTG $950,000 worth of products per month between February 2020 and July 2021. (Id. ¶ 24). In similar situations, courts have found defendants purposefully availed themselves of a forum state. E.g., ACH Food Companies, Inc. v. Wiscon Corp., No. 04-2589 M1/V, 2005 WL 2114056, at *9 (W.D. Tenn. Aug. 30, 2005) (“Here, it is undisputed that Defendant does business with seven customers who are located in the State of Tennessee, with total sales to those customers amounting to over $100,000 in 2004. . . . It is likewise undisputed that Defendant has actively solicited business in Tennessee. Accordingly, Defendant has purposely availed itself of the privilege of doing business in Tennessee.“). The Court finds Haiyan purposefully availed itself of the privilege of conducting business activities in Tennessee.
Further, CTG‘s TCPA cause of action arose from Haiyan‘s activities in Tennessee. “The law of this circuit is that the ‘arising from’ requirement is satisfied if the cause of action is ‘related to’ or
Finally, Haiyan‘s acts and their consequences have a substantial enough connection to Tennessee that it is fair and reasonable for the Court to exercise jurisdiction over Haiyan. Because the Court has already found the first two elements of specific personal jurisdiction are present, “an inference arises that the third, fairness, is also present; only the unusual case will not meet this third criterion.” J. W. Brewer Tire Co., 680 F.2d at 1126. To determine whether fairness exists, the Court must consider several factors, including “the burden on the defendant,” “the interest of the forum state,” “the plaintiff‘s interest in obtaining relief,” and “other states’ interest in securing the most efficient resolution of the controversy.” Intera Corp. v. Henderson, 428 F.3d 605, 618 (6th Cir. 2005).
On balance, these factors weigh in favor of the Court exercising jurisdiction. CTG has a strong economic interest in obtaining relief. (See Doc. No. 62-1 ¶¶ 47–48). Likewise, Tennessee has compelling interests in enforcing contracts its residents enter and in protecting its consumers from deceptive business practices.3 See Third Nat. Bank in Nashville v. WEDGE Grp. Inc., 882 F.2d 1087, 1092 (6th Cir. 1989) (“Tennessee has interests in resolving this case, not the least of which is to provide a forum for the adjudication of a dispute between a resident and a nonresident that has purposefully availed itself of acting in and causing consequences in Tennessee.“); S. Mach. Co. v. Mohasco Indus., Inc., 401 F.2d 374, 385 (6th Cir. 1968) (“[W]hen [a] contract is with a resident of Tennessee, the State‘s interest in resolving a suit based on the contract and brought by that resident cannot be doubted.“). True, it will be inconvenient for Haiyan to defend a suit in Tennessee. (Doc. No. 69 at 5). “Yet, [courts] have deemed specific jurisdiction to be proper even when a defendant would be compelled to travel.” Henderson, 428 F.3d at 618. Haiyan‘s status as a foreign enterprise, alone, does not make this case “unusual” enough for the Court to find the fairness requirement lacking.
Because the elements of specific personal jurisdiction are satisfied with respect to Haiyan, the Court rejects Haiyan‘s request for dismissal based on the lack of such jurisdiction.4
The Court also rejects Haiyan‘s argument that CTG has not stated a claim against it under the TCPA. The TCPA provides “remedies to consumers victimized by unfair or deceptive business acts or practices that were committed in Tennessee in whole or in part.” Tucker v. Sierra Builders, 180 S.W.3d 109, 115 (Tenn. Ct. App. 2005). “In order to recover under the TCPA, the plaintiff must prove: (1) that the defendant engaged in an unfair or deceptive act or practice declared unlawful by the TCPA and (2) that the defendant‘s conduct caused an ascertainable loss of money or property[.]” Id. (citation and quotation omitted).
CTG has alleged both elements. First, CTG has alleged Haiyan engaged in an act declared unlawful by the TCPA. The TCPA makes it unlawful to “[r]epresent[] that goods or services are of a particular standard, quality or grade, or that goods are of a particular style or model, if they are of another.”
Haiyan‘s argument that CTG has not stated a TCPA claim is unavailing. Haiyan contends a misrepresentation regarding a product‘s country of origin does not concern its standard, quality, or grade because “there is nothing in the statute or case law that brings ‘country of origin’ into the realm of the TCPA.” (Doc. No. 69 at 6). This argument misunderstands the scope of the TCPA. It is meant to cover “any act or practice that is unfair or deceptive to consumers.” Tucker, 180 S.W.3d at 115 (emphasis added). And courts are “required to construe it liberally.” Id. With this in mind, the Court cannot hold that only acts explicitly spelled out in the TCPA are covered by the TCPA‘s broad protections, as Haiyan suggests. (Doc. No. 69 at 6). The Court finds that misrepresenting a product‘s country of origin affects its standard, quality, or grade where (as here) country of origin differs from the parties’ agreement and representations and impacts the costs consumers will have to bear upon receipt of the product. Accordingly, CTG has stated a TCPA claim against Haiyan.
B. Valleywood Is Entitled to Dismissal of the Claims Against It.
The Court will dismiss the claims against Valleywood for lack of personal jurisdiction. All of CTG‘s allegations concerning Valleywood boil down to this: Haiyan has “complete control” over Valleywood. (Doc. No. 26 ¶ 9; see also id. ¶¶ 8, 10; Doc. No. 62-1 ¶¶ 3–4, 27–32). CTG has not alleged Valleywood engaged in anything resembling “continuous and systematic contact with [Tennessee]” as is required to show general personal jurisdiction. Miller, 694 F.3d at 678–79. Nor has CTG alleged Valleywood conducted
CTG‘s counterarguments miss the point. CTG contends the Court has jurisdiction over Valleywood because (1) it has jurisdiction over Haiyan and (2) Valleywood is “an agent and/or instrumentality” of Haiyan. (Doc. No. 62 at 11). CTG points out that “a non-resident parent corporation is amenable to suit in [a] forum state if the parent company exerts so much control over the subsidiary that the two do not exist as separate entities but are one and the same for purposes of jurisdiction.” (Id. (quoting Carrier Corp. v. Outokumpu Oyj, 673 F.3d 430, 450–51 (6th Cir. 2012))). However, the Court would have to take this principle a step further to exercise jurisdiction over Valleywood. It would have to hold a subsidiary controlled by a parent may be hailed into court for actions taken by the parent that did not involve the subsidiary at all. Such a holding would conflict with a prior decision by this Court. Shelter Mut. Ins. Co. v. Bissell Homecare, Inc., No. 3:20-CV-00813, 2021 WL 1663585, at *9 (M.D. Tenn. Apr. 28, 2021) (subsidiary was not subject to personal jurisdiction where parent company allegedly manufactured and sold battery in Tennessee that injured plaintiff where plaintiff did not allege subsidiary was “connected to the relevant battery or the State of Tennessee in any way“). Further, such a holding would run afoul of the basic principles of personal jurisdiction, which require such jurisdiction to stem from entities’ contacts with the forum state. Neogen, 282 F.3d at 887. Because CTG has alleged no such contacts by Valleywood, the Court cannot exercise personal jurisdiction over it.
CTG might object that it has alleged more information about Valleywood than the Court gives it credit for. In the Amended Complaint, CTG in fact alleges “[t]he Court has personal jurisdiction over all Defendants because they continuously and systematically conducted business with Cabinets To Go, which they knew to be based in Tennessee.” (Doc. No. 26 ¶ 13). But such broad, conclusory allegations are insufficient to establish personal jurisdiction. Campinha-Bacote v. Hudson, 627 F. App‘x 508, 510 (6th Cir. 2015) (affirming dismissal of complaint for lack of personal jurisdiction where complaint contained “conclusory jurisdictional allegations“); Mende v. Milestone Tech., Inc., 269 F. Supp. 2d 246, 251 (S.D.N.Y. 2003) (“Conclusory allegations are not enough to establish personal jurisdiction“) (citation and quotation omitted). Nor do they require the Court to permit further jurisdictional discovery. Shelter Mut. Ins. Co. v. Bissell Homecare, Inc., 2021 WL 1663585, at *6 (explaining it “is well within the Court‘s discretion to deny a plaintiff‘s request for jurisdictional discovery where, as here, the plaintiff makes only conclusory allegations and fails to offer any factual basis for its allegations“) (citation and quotation omitted).5 The Court will dismiss
C. Drouot Is Entitled to Dismissal of the Claims Against It.
The Court will also dismiss the claims against Drouot for lack of personal jurisdiction. CTG has made only four allegations specific to Drouot:6 (1) “Haiyan owns and operates [Drouot]” (Doc. No. 26 ¶ 6); (2) Haiyan “has the authority to exert complete control, and does exert such control, over Drouot” (id. ¶ 7); (3) Drouot and the other defendants “are all essentially the same entity” (id. ¶ 10); and (4) CTG “began doing business with . . . Drouot in 2011” (Doc. No. 62-1 ¶ 9). Drouot‘s status as a subsidiary controlled by Haiyan does not automatically make it subject to the Court‘s personal jurisdiction. See supra Section III.B. And CTG clearly has not alleged facts showing that Drouot had continuous and systematic contact with Tennessee, or that Drouot conducted any activities in Tennessee that gave rise to this lawsuit. Accordingly, the Court may not exercise personal jurisdiction over Drouot. Miller, 694 F.3d at 678–79; Youn, 324 F.3d at 419.
D. Alno Is Entitled to Dismissal of the Claims Against It.
Finally, the Court will dismiss the claims against Alno for lack of personal jurisdiction. CTG‘s allegations against Alno resemble its allegations against Drouot. Primarily, CTG avers Alno is a subsidiary controlled by Haiyan. (Doc. No. 26 ¶¶ 4–5, 10). However, CTG makes a few additional, semi-relevant allegations. It claims Haiyan was supposed to use Alno to manufacture products for CTG and that CTG later discovered products coming from Alno had actually been manufactured in China. (Id. ¶¶ 5, 23; Doc. No. 62-1 ¶¶ 19, 37). These allegations hint at a connection between Alno, Tennessee, and the present litigation. But they are too vague, speculative, and sparse to show personal jurisdiction or require jurisdictional discovery. See Bissell, 2021 WL 1663585, at *6 (“Discovery is not required based on speculation or hope.“). Hence, the Court will dismiss the claims against Alno without prejudice. CTG may refile those claims if it can cure the foregoing defects in the allegations it has raised.
IV. CONCLUSION
For the foregoing reasons, the Court orders as follows: (1) HDA‘s Motion to Dismiss (Doc. No. 57) is GRANTED IN PART AND DENIED IN PART, (2) Valleywood‘s Motion to Dismiss (Doc. No. 47) is GRANTED, (3) the claims against Valleywood and Drouot are DISMISSED, and (4) the claims against Alno are DISMISSED WITHOUT PREJUDICE.
IT IS SO ORDERED.
WAVERLY D. CRENSHAW, JR.
CHIEF UNITED STATES DISTRICT JUDGE